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Line 2 – Medical and dental expenses

Property placed in service before 1999

Do not include any adjustment for differences between federal and

For property placed in service before 1999, refigure the AMT depreciation

California laws.

using the ADS, with the same convention used for the regular tax. See

the table below for the method and recovery period to use.

Line 3 – Personal property taxes and real property taxes

Enter on this line any of the following from federal Schedule A

Property placed in service before 1999

(Form 1040) line 6, line 7, and line 8:

IF the property is . . .

THEN use the . . .

• State and local personal property taxes

IRC Section 1250(c) property

Straight-line method over 40

• State, local, or foreign real property taxes

years.

Line 4 – Certain interest on a home mortgage

Enter home mortgage interest in which the proceeds were used for

Tangible property (other than

Straight-line method over the

IRC Section 1250(c) property)

property’s AMT class life.

purposes other than buying, building, or improving your principal

residence or a qualified dwelling that is your second home (see

depreciated using straight-line for

IRC Section 163(h)(3)). This may be all or part of the amount on federal

the regular tax

Schedule A (Form 1040) line 10, line 11, or line 12.

Any other tangible property

150% declining balance method,

Example 1: Gregory paid $950 interest on a $12,000 home equity loan

switching to straight-line the first

used to buy a ski boat. He would enter $950 on line 4 because the

tax year gives a larger deduction,

proceeds were not used to buy, build, or improve his home.

over the property’s AMT class life.

Example 2: Jackie paid $1,200 interest on a $15,000 home equity loan to

Property placed in service after 1998

install a swimming pool at her home. She would not make any entry on

For property placed in service after 1998, no adjustment is necessary if the

line 4 because the proceeds of the loan were used to improve her home.

property is IRC Section 1250(c) property or tangible property (other than

Exception. Do not include interest on a mortgage you took out before

IRC Section 1250(c) property) depreciated using the straight-line method

July 1, 1982, if it was secured by property that was your main home or a

or 150% declining balance method for the regular tax. For any other

qualified dwelling used by you or a member of your family at the time you

tangible property, use the 150% declining balance method, switching to the

took out the mortgage.

straight-line method the first tax year that it provides a larger deduction.

Use the same convention and recovery period used for regular tax.

Line 5 – Miscellaneous itemized deductions

Enter on this line the amount from federal Schedule A (Form 1040),

Refer to federal Publication 946, How to Depreciate Property, or IRC

line 27, adjusted for differences between California and federal law.

Section 168(g), for more information on the ADS method.

Line 6 – Refund of personal property taxes and real property taxes

Grapevines replanted as a result of phylloxera infestation or Pierce’s

Enter on this line any refund of taxes you received if all of the following

Disease that are depreciated over 5 years for regular tax, must be

applies:

depreciated over 10 years for AMT.

• The taxes are those described in line 3

Partners, S corporation shareholders, and LLC members: Enter the

• The taxes are attributable to a taxable year after 1986

amount shown on the Schedule K-1 (565, 100S, or 568) issued by your

• You deducted the taxes in a taxable year after 1986

partnership, S corporation, or LLC.

Line 7 – Investment interest expense adjustment

Enter on line 8 the difference between depreciation for regular tax and

If you completed form FTB 3526, Investment Interest Expense Deduction,

depreciation for AMT. Do not include depreciation from the following:

refigure your investment interest expense using a second form FTB 3526.

• Expenses you incurred as an employee and deducted on federal

Complete line 1 through line 8. Follow form FTB 3526 instructions for

Schedule A (Form 1040).

line 1 through line 8, except for the following:

• An activity for which you are not at risk.

• When completing line 1, include any interest expense from Schedule P

• Amounts received from a partnership or S corporation, if the basis

(540), Part I, line 4, that was paid or accrued on indebtedness

limitations under IRC Section 704(c) or IRC Section 1366(d) apply

attributable to property held for investment within the meaning of IRC

• A passive activity.

Section 163(d)(5). An example is interest on a home equity loan from

• A tax shelter farm activity.

which the proceeds were invested in stocks or bonds. This interest might

Instead, include these types of depreciation when you figure adjustments

be deductible as home mortgage interest for regular tax, but not for AMT.

for line 5, line 11, line 13f, line 13i, or line 13k, whichever applies.

• When entering your 2012 disallowed investment interest expense on

If the AMT depreciation is more than the regular tax depreciation, enter

line 2, use your 2012 AMT disallowed investment interest expense.

the difference on line 8 as a negative amount.

• When completing line 4 a-c, refigure your gross investment income,

any net gain from the disposition of property held for investment,

Line 9 – Adjusted gain or loss

and any investment expenses by taking into account all of your AMT

You will have an entry on this line only if you reported a gain or loss on

adjustments and tax preferences that apply.

California Schedule D (540) or Schedule D-1, federal Schedule D, federal

Form 4797, or federal Form 4684, Casualties and Theft, for income

Your adjustment is the difference between your AMT form FTB 3526,

producing property that has a different basis for AMT than for regular

line 8, and your regular tax form FTB 3526, line 8. If the amount figured

tax. Generally, if you reported a gain or loss from the sale or exchange of

for AMT is more than the amount figured for regular tax, enter the

mutual funds, stocks, or bonds, you will not have an entry on this line.

adjustment as a negative amount.

To figure the amount to enter on this line:

If you did not itemize deductions and had investment interest expense,

do not enter an adjustment. However, if you reported investment

Step 1 – Refigure the adjusted basis of the asset sold. Take into account

interest expense on federal Schedule E, follow the instructions above for

any AMT adjustments you made this year or in previous years for

completing form FTB 3526.

depreciation, incentive stock options, circulation expenditures, pollution

control facilities, research and experimental expenditures, and mining

Line 8 – Post-1986 Depreciation

costs.

If you filed federal Schedules C, E, or F and have tangible property

which you began depreciating after 1986, you must use the Alternative

Step 2 – Refigure your gain or loss using the adjusted basis from Step 1.

Depreciation System (ADS) to calculate AMT depreciation as follows:

Schedule P (540) Instructions 2013 Page 3

Instructions For Schedule P (540) - Alternative Minimum Tax And Credit Limitations - Residents - 2013 Page 3

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